Railroad’s Golden Age

By Sam Mamudi

Betsy Morris of The Wall Street Journal has a great story today about the boom in the railroad industry:

Welcome to the revival of the Railroad Age. North America’s major freight railroads are in the midst of a building boom unlike anything since the industry’s Gilded Age heyday in the 19th century—this year pouring $14 billion into rail yards, refueling stations, additional track. With enhanced speed and efficiency, rail is fast becoming a dominant player in the nation’s commercial transport system and a vital cog in its economic recovery.

This time around, though, the expansion isn’t so much geographic—it is about a race to make existing rail lines more efficient and able to haul more and different types of freight. Some of the railroads are building massive new terminals that resemble inland ports. They are turning their networks into double-lane steel freeways to capture as much as they can get of U.S. freight demand that is projected to grow by half, to $27.5 billion by 2040, according to the U.S. Department of Transportation. In some cases, rail lines are increasing the heights of mountain tunnels and raising bridges to accommodate stacked containers. All told, 2013 stands to be the industry’s third year in a row of record capital spending—more than double the yearly outlays of $5.9 billion a decade ago.

Among the railroad companies that Betsy notes as part of this growth story are Union Pacific (UNP), CSX (CSX) and Kansas City Southern (KSU). So far in 2013, those companies’ stocks have risen 12%, 23% and 28%, respectively.

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